Thursday, May 28, 2009

Oh-Oh... Petrobras the Tax-Evader

Brazil’s national oil company, Petrobras, has come under scrutiny in an investigation that threatens to complicate government efforts to wring more revenue from the deepwater oil fields that are expected to transform the country into a global energy power.

The Senate voted last week to investigate whether Petrobras had avoided tax payments and awarded illegal contracts, among other issues. The vote was sealed by senators who oppose President Luiz Inácio Lula da Silva’s Workers Party, setting up an inquiry that is likely to drag on for months.

The investigation could prove an embarrassment for Mr. da Silva’s government, which is seeking to overhaul oil legislation to extract a much higher percentage of revenues from the deepwater oil fields, which are expected to hold five billion to eight billion barrels of oil and natural gas.

[...]

The big question now is whether the government has enough time to complete the oil reform law before Lula is out of office” at the end of 2010, said Marcos Tavares, director of Gas Energy, an energy consulting firm based in Porto Alegre, Brazil.

Mr. da Silva, who has said he wants to use additional oil revenues to set up funds for social programs like health and education, called the congressional inquiry “irresponsible” and “unpatriotic,” especially at a time when the country was coping with the global economic crisis.

The chief executive of Petrobras, José Sergio Gabrielli, said the investigation waspolitically motivated, arguing Tuesday that it “won’t jeopardize Petrobras or its investments.” He added that “unfortunately, the negative headlines do affect the image of the company.”

The investigation focuses on contract bidding and tax payments. The company already fired two employees and punished three others for their involvement in irregularities in the bidding for oil platform renovations, said Lucio Mena Pimentel, a Petrobras spokesman.

The company came under increasing public scrutiny over a decision to withhold up to $2 billion in federal tax payments stemming from a supposed overpayment of taxes in 2008. Mr. Pimentel said Petrobras was allowed to do that because of legislation that protects companies from major exchange-rate fluctuations, though some analysts have questioned the company’s interpretation of the law.